Some people are made to have a job and work for someone or some company and do very well and are very happy or content in that position. Others would be restless in working for someone else and feel the need to make their own rules and have more control over their work place. Because we only have one of the other choices in the matter of how we spend our time you would think it would be a pretty simple decision wouldn’t you? Well sometimes it is, but here is the clincher to this situation.

 People change. Change is the only constant we truly have in our lives. You may stay with the same partner for 50 years and you may stay at the same company or work in the same industry for years, but the one thing that is constant in all of this is change. People change, industries change, families change, economies change. Everything changes. And that is where the confusion and anxiety comes from. It is when the change occurs and we don’t know how to react to it. Plus a lot of the time change has a tendency to sneak up on us and before we know it. We need to change. And then we are in a reactionary mode instead of being in a responsive mode, therefore creating the anxiety and uncomfortableness that comes with change.

 The change feelings that may occur in ones like can come in many different forms and have many different reactions to oneself, but the one I want to address here is the one regarding whether you get a job or buy yourself a job.

 Buying or starting a business is an area that I am an expert on since I have owned 35 different businesses that I have either bought or started and probably managed to make more mistakes in the short time that I was buying, starting and selling business than most people could make in their lifetime, therefore enabling me to write and comment on this subject for your benefit.

 In today’s economic climate we are experiencing a large number of people who had been employed and have had a job and their job was eliminated and they are out on the hunt to find another job. A commendable quality for them. But the chances of them finding another job is probably pretty thin, especially if they are looking to stay in the same field they were in, with the same amount of pay and in the same geographic area that they were working in before. As my old science teacher used to say. “It is very possible, but not very probable” that they will find such a position. So what are their choices? Back to what I mentioned earlier. Either they go out and find a different job or buy themselves a job.

 Since I am a qualified expert on the buying oneself a job you need to take heed and review the 11 different points I have listed below. These are short, but substantive issues that you must address if you are going to be buying yourself a job and be happy and successful at it. Not following the listed information could determine you financial failure and or the cause of your personal unhappiness.

Take your time and study each of the listed areas of life and business I have described and then move forward.

  I have not gone into great detail as to all of the ins and outs and intricacies of operating a business. There are plenty of books on that subject for ever particular business that is available. What I want to address and for you to think about is whether you want to or have the qualities to be the one who buys themselves a job or not. The final decision if for you to make, but by following the listed points I have made there is a very good chance of you actually making the right decision for you and your family and your future happiness, which is what it is all about.

 Good luck and good hunting for the business of your dreams and enjoy the journey.

 1. First decide what you like and don’t like to do.

Sounds simple, but if you don’t like cooking or working around food then why would buy a restaurant? Because you tried to justify it by saying it is really marketing and the food is only an end to the means? You can say that and part of it is true, but in the beginning you will BE working with food. So to begin with find something you like to do and gravitate in that area. Reflect on what you enjoy doing. Your hobbies. Do you enjoy working one on one with people? Old people, young people. Maybe you are tired of working with people and want to work in an indirect manner with people on a business to business level instead. This is probably one of the most crucial parts of the equation you need to address before you go any farther.

 2. Where do you want to live?

Generally people want to work close to where they live. This is not always true, but for the most part it is. Are you willing to buy a business that is 1 to 2 hours away from your home and commute daily to it? Or do you want it to be across town within 5 minutes of your home? Or do you want something that involves traveling all over the country and enjoying a different setting every day?

In today’s business with an individual’s access to the internet, cell phones, web sites, asp systems on the internet, outsourcing of administrative duties and pcanywhere you can be doing business literally around the world from your bedroom at home while never leaving home and having the perception of a large company. So your ability to reach a large audience of customers without leaving a geographic area is available to you. So if you want to live in a resort town and work across the world it is possible for you to do in today’s economy.

 3. How much money do you want to make?

Don’t give the lame answer of a lot? Be definite. Determine how much you need and then add to that amount to get a realistic number. You have got to have a goal as to how much money you want to make before you set out to buy or get into a business. Before you get into a business you HAVE to know the dollar amount as to what you want to make, because without this number you will never be able to determine if the business can support that amount.

All too many times people jump into a business not having a clue as to how much money the business can really generate and then after they get into the business they are disappointed that they have invested a large amount of time and resources only to find out the business could not support them.

That is why we want to know on average how much income a business will generate before we start or buy the business and then having that number we work backwards to see if it meets our requirements of being capable to support us in our financial needs.

 4. What is your risk tolerance?

Are you willing to put everything you have on the line to get into business and sink or  swim or are you only wanting to put your toe in the business and try it out to see if it is for you or not. If you are not one who has a high risk tolerance then maybe you should be looking at a franchise where they already have systems in place and if you follow the tried and true program of the franchise you should be successful. But keep in mind that the more you put into the business the more you are going to get out. So if you think you can only work 20 hours a week at a business instead of devoting 60 hours a week to knowing everything there is about your business and industry there will be a difference in the results you receive from the business. Plus, if you are concerned about not wanting to lose all of your money I would suggest that you start out small with a low investment business, because you will make mistakes and you will end up paying tuition to learn the business so you might as well start out with a small investment and work your way up to a larger business later.

 5. Do you buy or start a business?

When offered the difference between the two I always suggest buying an operating business. Why? Because the day you purchase an operating business you have a cash flow. It may not be the greatest cash flow in the world, but you have a cash flow and with that cash flow you have a jump start with the business and all you will need to do is to concentrate on growing the business and cash flow. Where if you start out with a new business you have nothing. Only a hope and a dream and it will be exciting, but you have no cash flow.  

Buying a business is always a safer bet than starting a business. At least with buying a business the day you take the business over you have a cash flow and all you have to do is build the cash flow. Starting a business regardless how good of a franchise or idea it may be you are starting with zero and when you start at zero it can take a long time to get to breakeven let alone profitability.

 6. What is the upside to the business?

If you are buying an existing business you need to know if there is an upside to the business. In other words is the present business owner getting all there is out of the business or have they been lazy and not advertised or marketed the business and not paid attention to it and all it needs is your attention. Do your due diligence and check out the business and chances are the present owner of the business has gotten tired and burnt out and left a lot of opportunity in the business.

You never want to buy a business that has no upside to it. Sometimes there will not be any upside to a business, because the previous owner has owned it for so long and ran it so well that you can never duplicate their business model. Sometimes there is no upside to a business, because the industry has changed. One does not want to be selling horse whips, when cars were first coming onto the scene.

Check the competition of the business. Generally speaking regardless if you are buying an existing business or starting a business the success of the business if going to be determined by the amount of competition you have. Very simple to find and very definite the reason for the success or failure of the business.

7. Where do I find a good business to buy?

Good businesses are hard to find. There are many of businesses for sale on the internet on business for sale web sites like bizbuysell.com, businesssesforsale.com, bizquest.com, AmericanBusinessBrokers.com and dozens of other web sites. But some of the best businesses you could buy are not on the internet. They are being run by their present business owners and all that is needed is for them to be asked. Yes, just ask. Once you have determined what kind of business you want to be in and where you want to be, then start asking around with the present business owners if they have every considered selling their business. You will be surprised that there are many business owners that would like to sell their business, but don’t know how to or have just been putting it off and all they are needed is to be asked. Take it upon yourself to ask and if they are not interested in selling their business you will at least get a preview and education of the business is all about.

 8. How do know what a business is worth after you find it?

Valuation is one of the toughest things about buying a business. ALL sellers think their business is worth more than what it really is. It is just human nature and you are not going to change that. Part of the valuation process is going to be decided as to what kind of buyer you are. By that I mean are you looking to buy yourself a job or are you looking to buy a business to sell in a few years? It makes a difference when it comes time to buy. If your goal is to buy yourself a job and expect to keep the business for quite some time then you can afford to pay a little extra for the business. But if you are planning on buying a business and then selling it in a few years you have to make sure that you get it as cheap as possible so that you will have a larger profit margin when it comes time to sell. There are several different ways to determine the value of the business. One is to hire business valuation consultant and have them review the numbers and quality of the business. Another way is to purchase the book “The Business Reference Guide” by Tom West, which lists hundreds of different business and what the general rule of thumb of valuation for each of these businesses is. It is the same book that is used by business brokers when valuing businesses. And another way is to hire a knowledgeable business broker and pay him to do the valuation for you. But make sure they are an experienced business broker and are not going to school on you.

9.     Do you have the money or where do you get the money?

Depending on the total cost of the business and if it has a good cash flow stream you will be able to find the money. A lot of businesses are still being sold with the seller doing owner financing or at least partial owner financing and I suggest to buyers that they look for this kind of arrangement. Because, if the seller is willing to finance part of the sale they are electing to remain a part of the business and are your partner until you can get them paid off and they will be more willing to take your phone calls or offer advice if you still owe them money. Local banks are the next choice for getting money to purchase a business. They will be very conservative and probably only want to loan on a business that has real estate included as opposed to a Subway or something that is in a leased space with very little in the form of hard assets for them to collator, but they will probably loan in the 60% to 70% of the total sale price of the business. However, you get the money whether it is from your savings, relatives, friends, or banks get the money so you can get into the game so to speak. Once you get into the game and own your own business all of the banks, relatives, friends etc… will treat you differently, because you are now a business person. It may sound weird, but it is true.

 10. When do you buy the business in today’s economy?

As soon as you find the right one. It is not all about the price. Sure price is important, but the quality of the business, location, industry of the business, whether you like it or not and especially if you are going to be staying in the business for a while are more important than the price. Of course you don’t want to over pay above the market price and end up behind the eight ball right from the start, but when you find it. Buy it. Don’t get caught up in the small details of trying to save a ½ point on the financing or a few thousand dollars on the purchase price. Your goal is to get into business and stay in business and make a profit. Until you get into the game you are nothing more than a wanta-be who is setting on the sidelines talking about. I don’t care if you have hundreds of thousands of dollars in the bank. Until you get into the game of business you just a wanta-be on the outside looking in.

 11. Bonus Tip.

DO NOT search for the perfect business. Why? Because there is no such animal. All businesses will have some warts on them and what you are looking for is a business that will meet your general needs and wants. Just like in friends, spouses, co-workers there are no perfect people or perfect businesses so you might as well accept this fact before you begin your search.

People have a natural tendency to look for and talk about the things that are wrong about a person or a thing. Become a good finder and look for the things that are good about the business and how many of the points I have listed here that meet your criteria and then go forward. Nobody bats 100% and you won’t either. But by following my list of what to look for in the buying or starting of a business you will come much closer to your goal of having an enjoyable journey in your life as a business owner.

Oil seems to be on every bodies mind a lot lately both in the good sense and the bad sense, but regardless of what one thinks of the oil industry it is the #1 most efficient energy source in the world. And if we didn’t have it we would still be on horse and buggies or riding a bicycle to and from work.

The oil industry has always had a mystical aura about it in the fact that it just appears out of the ground and the thoughts of Jed shooting at the ground in the Beverly Hillbillies and it comes bubbling out of the ground. In reality this is not the case, but it does make for a good story.

I am not going to go into the many different reasons of why oil is a good thing, but I do want to address the bad publicity it has gotten in the area of risk that is involved when investing into the oil industry.

First I want to disclose that I come from a family that was born and raised in Southern Illinois who made their living working in the oil industry by drilling and servicing oil wells. I know people are never aware that there are such things as oil wells in Illinois, but there are approximately 650 oil fields and around 30,000 oil wells in the state. It is a dirty business and not very many people want to do this kind of work, but we are all thankful for the people who have chosen to work in this industry.

When most people think of investing in oil wells they think of dry holes and unscrupulous individuals like Snidely Whiplash hiding in the weeds waiting to prey on another suspecting investor with cash hanging out of their pocket. Again, another myth. The reality of investing in oil wells is that with this kind of investment you can at least visit the well site and see where your money was invested and talk to the operator who you invested with and find out the situation if it is either good or bad. Not so when an individual invests in the stock market or mutual funds. And that is why I wrote the article about the “10 Myths of Investing in Oil”

When people invest money they are either buying stocks or mutual funds or REITS or some other type of investments I can’t even pronounce and how do they do it? Either online with a computer screen in front of them or at an Edward Jones or Financial Institution’s office. And even then you don’t know what you are investing in. You get to meet a nice person to whom you write the check to, but that is about it. And is it risky? Can you say “Bernie Madoff?”

My point to the story is not to make light of investing in stocks, bonds, mutual funds, or CD’s or other financial instruments. It is only to let people know that investing in oil is no more risky and sometimes less risky than the many different financial products that is touted by the many financial institutions.

Relax, enjoy the journey and hopefully I have shared some information that will benefit you in some way.

Myth #1 – You can lose all of your money.

Truth – It depends on how you want to look at your money. In reality the money that you invest into the oil business is different than the money you would invest into the stock market or the purchase of real estate. When someone invests into the stock market or the purchase of real estate they are investing with “post” tax dollars. Meaning they are using the money they have left over after paying the taxes that are owed on the money they earned to make the investment. But when someone invests into the drilling of an oil well they are given preferential treatment from the federal government in the form of Tangible and Intangible investment allowances. What this means is that if you invested $25,000.00 into the drilling of an oil well you would be allowed to write off or deduct the Intangible amount of your investment off of your annual gross income 60% to 75% of your investment could be written off against your personal income) of the year you made the investment. In essence you could never lose all of your money, because it never was all your money in the first place. The government was going to get their part of your income regardless whether you invested into an oil well or not. Generally they were going to get between 35% to 40% of your income anyway. So when you invest into an oil well you are really using some of your money and part of the government’s money.

Truth – When you purchase stock from a stock broker or online in essence you are buying tiny piece of a huge corporation with millions of many different pieces. There is some comfort in knowing that it is a large corporation with holdings all over the world, but it also comes with a huge overhead to support. When one purchases stock in such a large corporation with their large overhead it takes a lot of movement in the market for one to make a substantial profit, plus you are buying the stock with “post” tax dollars so you only getting to invest 60% to 70% of the income you had earned. You have already given up a large part of your buying power before you even start. When you invest into an oil well it is called “Direct Participation” and that is what is happening. You are investing directly either into one oil well or a group of oil wells. Your investment is more focused on the production of oil and not on the running of a huge corporation. Your investment will have the chance to grow faster and larger when it is focused instead of thrown into a huge group where it is used to run the machine.

Truth – There are different kinds of drilling when it comes to finding oil. The type that most people have heard of is “Wildcatting”. It is what was talked about on the TV shows of Dallas and other movies about oil wells where the guy goes out into the middle of nowhere and when he is down and out on his last dollar hits a gusher of a well and it blows up in the air and everyone lives happily ever after like the Beverly Hillbillies. In situations like that where one is drilling in the middle of no known oil production the odds of getting a dry hole are probably more like 25 to 1 that you will get a dry hole.

The other type of drilling that is done and has a much higher success rate is “Developmental Drilling”. When you are doing developmental drilling you are either drilling next to or very near to existing oil wells or oil fields. This type of drilling is highly successful and can sometimes have a 100% success rate. When investing into an oil well be sure to clarify if the investment is a wildcat or a developmental drilling project. Chances are if you are investing into a developmental drilling project you odds of hitting oil and making money are going to be very good.

Truth – The best way to find out if you are getting a good investment opportunity is to do the research. Generally that is why people buy stocks and investments from a stock brokerage house or online service they have heard of, because they are not really interested in doing the research. An investment representative will ask them their tolerance for risk and take their money and invest it for them. Minimal risk. Minimal return.

When in investing into an oil well do the research. A for real oil drilling and exploration company will invite you to the drilling site and explain the risks to you first hand. They will allow you to hear what the geologist has to say in regard to whether the well is going to be commercial or not in his opinion. Legitimate oil operators don’t shy away from the investor who wants to learn more about the process of drilling and producing oil wells. They welcome the questions and comments and it allows you to get directly to the people who are making the oil well investment decisions and thereby increasing your knowledge of the oil industry and reducing your risk.

Truth – If anyone really knew how much oil an oil well would make before it was drilled do you really think they would be asking you to invest? Nobody knows. And I mean nobody knows how much an oil well is going to produce.  When a project is based on developmental drilling it is easier to get an idea and a possible range, but even then nobody ever really knows how much an oil well will make. All oil wells are different. They can be right next to each other and be totally different. And that is why oil operators share the wealth and the risk when drilling. Because of the unknown. Even the largest companies in the world like Exxon, Shell or BP share the risk when they are drilling new projects, because they too know that there is an unknown factor when drilling oil wells and it is better to have a piece of a lot of oil wells than have all of your eggs in basket per se with just one oil well.

Truth – Very rarely are the carrying costs to maintain and operate an existing oil well excessive. The exception is rare. The cost to prepare, drill and complete and oil well are expensive, but if an oil well is completed properly the cost to maintain and operate are almost minimal. There are some wells that may go a year or beyond before ever needing any additional maintenance.  Only when you have factors such as corrosive fluids or other chemical reactions down hole do you encounter excessive maintenance costs. It is rare that you will have excessive mechanical costs after an oil well has been completed. Your oil operator is also your partner when you are involved in direct participation oil drilling and they do not to be burdened with high carrying costs either. You can be assured they have already factored carrying costs into the equation, because they want the oil well to be a viable investment too.

Truth – Investing into oil wells is like when you buy stock. You are only liable for the amount of your investment. In the stock market if the company you invested in goes broke or has a product liability issue you are not affected by these issues other than your investment may go down or become worthless. The same is true when investing in an oil well where you have an operating agreement between yourself and the operator stating that you are not liable for any actions of the oil well and the operator is assuming the responsibility and liability. It is like getting the best of both worlds. You are on the ground so to speak in the front row watching your investment, but without any of the liability.

Truth – Oil wells have a very long life span. Oil wells have a tendency to begin with a higher rate of production, because in the beginning you are letting off the pressure that has been captured underneath the earth’s surface for millions of years and over time it is like putting a very tiny tube into the side of huge tire full of air whereby it eventually slows down to a slow stream and continues to blow out air. Oil wells are similar. After the initial pressure has been released there is still oil in place and some wells will continue to produce 20, 30, 40 & 50 years under their own pressure. Some oil wells will need to get a push later in life with an operator injecting water or some form of gas to give the oil a push and help it come out. But generally an oil well has a long life. The production won’t be at a very high daily rate, but it will keep going and going and going like the Ever Ready Battery Bunny.

Truth – Everything in life is cyclical. Things go up and thing and things go down. And the price of oil is not different. However, in today’s world the market place is different. We now have 1 Billion people in India with a 300 Million middle class that is evolving and we have 1.1 Billion people in China that has 300 Million middle class that is evolving there too and are consuming more and more energy to help their countries grow and prosper. Plus like the stock market oil wells are known to be long performers and continue to produce and give an economical return to their investors. In the stock market if the sales of a company should tumble and go into the negative column as it did with General Motors and all of the investors money was wiped out with the company filing bankruptcy due to low sales. In the situation of an oil well if the market price should drop below the amount needed to be profitable you can turn the well off and wait until the market price returns. And it always cycles back around again to profitability in the oil business.  You find after doing the math on the amount of money you have invested that over time before factoring in your tax benefits that oil investments generally have a very high rate of return.

Truth – An interest in an oil well is sellable, because it is based on cash flow. Just like a stock is priced based on earnings times a multiple an oil interest is the same way. The longer you own an oil interest and the more established the production becomes the easy it is to sell, because it has a proven cash flow record just like a stock in a company would have.

Truth – It is believed that all of the big oil or easy oil has been found in the Continental United States excluding the offshore oil which is yet to be discovered. But big oil and new oil is expensive. Because it is in hard to get to places and it is much deeper than the oil found in the past it is much more expensive and therefore it would cost a private investor considerably more to invest in this type of oil exploration.

But there are thousands of proven oil fields in the United States with oil reserves in place that have been sitting idle for many years. Fields that were abandoned when the price of oil had dropped and before new technology was invented to get the oil out with reduced costs and at today’s prices make the developmental drilling procedures of an existing oil field very profitable and cost effective in today’s market place.

Everyone knows that there are “rules of thumb” formulas in every industry. For example when determining the value of a business there are “rules of thumbs” as to what different businesses are worth. Motels are figured on a multiple times the gross sales, convenience stores are figured on a multiple times the net profit, service businesses are figured on a multiple of net profit plus equipment and so on. But did you know that there is a “rule of thumb” as to how long your life expectancy should be? Yes, as wild as it may sound there is a “rule of thumb” in regards to how long you should have left to live. Remember this is just a rule of thumb and not a scientific formula, but yet very interesting.

The “rule of thumb” for life expectancy is as follows. Take the difference between your present age of today and 100 and multiply it times 2/3 and then add that amount back to your present age to get the “rule of thumb” of your life expectancy. For example if you are 55 years old today then 100 – 55 = 45 x 2/3 = 30 + 55 = 85. In other words if you are 55 years old today the “rule of thumb” is that you should live to be 85 years old.

OK, I know I don’t have any scientific data to confirm this formula, but remember it is a “rule of thumb” and what if it is pretty close to being right? The point here is that there is going to be an end and generally our bodies don’t continue at the same rate and energy level that we are at today and then all of a sudden quit working like some batteries in an electronic toy or flashlight. No, we gradually begin to slow down and the light gets dimmer. Remember, I am not a pessimist, just the opposite I am a realist.

So if any of this is true then why don’t we do something about it and get prepared. Maybe a little bit prepared?

Over the years of my helping business owners in understanding all of the ins and outs of either selling their business or getting it prepared for the sale I have discovered one thing that has helped them to get the most value out of the business when it came time to sell. And that was that they took the time to prepare themselves and the business in a manner that was practical and understandable to what a buyer would look for and ultimately pay top dollar for. Regardless as to whether the buyer would be a family member or an outsider. I have a lot of respect for business owners who operate their businesses everyday and I know how much work it is to keep the business operating and how distracting things are on a daily basis, let alone trying to grow a business or taking the time to prepare and collect the needed information so that a proper valuation of the business can be done, because I too ran and operated 35 different businesses and as they say “I feel your pain and have walked in your shoes”.  But generally business owners always will put this type of work off thinking they will get to it later and later comes faster than we all think.

Businesses owners are a very unique group of individuals who are generally not given the appreciation and recognition that they deserve. They are the ones who make things happen. They are constantly taking action either because they want to or they have to in order to get something done. Yet, when it comes time to get the most value for them and their families for the equity they have accumulated over the many years of hard work it is sometimes a mystery as to how to get that equity out of the business.

There isn’t a week that goes by that someone will ask me what their business is worth thinking that since I have sold hundreds of businesses that I should have the answer on the tip of my tongue, but in reality without the proper information I don’t have a clue. But there are some general “rules of thumbs” that I am going to share with you that can give you an idea as to what a buyer may think your business may be worth and ultimately they are the ones who really matters. It is irrelevant as to what you think your business is worth, because you are not buying it, someone else is and they are going to have their buyer’s hat on and you are going to have your seller’s hat on.  But first let me ask you a few questions that will need to be answered.

1. What do the Numbers Say? Look at the income & expense numbers for the last three (3) years.  Why?  Buyers are looking to purchase an income stream and want to see what the business has been doing for at least the last 3 years. Is it trending up or trending down? Buyers are looking to buy an income stream and especially one that has an upside to it. They like to find businesses that are well ran in a good industry and just need a little tweaking to make it more profitable.
2. What is the Quality of the Assets? By this we mean: What kind of condition is the building or the vehicles, the fixtures, the  equipment that is being used in the daily operations of the business?  Have these items been neglected and possibly antiquated or worn out? Is the business current with all of  the governmental codes and requirements? If not what will it cost to get the business current.
3. We are always selling a revenue stream. So has all of the income generated by the business been ran through the books? Are there personal items that have been paid by the business that need to be identified so that the buyer can get a true picture of what the business is generating? Remember, the buyer is looking to buy a revenue stream. If you have any questions about this philosophy I would recommend that you take your seller hat off and put on a buyers hat and make a list of the items that you would be concerned about if you were buying a business to support yourself and your family. It is a good reality check. We are not trying to be personal on any of these items only realistic for both parties.

These are just a few of the many questions that will need to be answered before a definite valuation can be arrived. With the above listed information you can now use a multiplier to get an idea what your business may be worth at a particular point in time. For a retail business that would include real estate you can generally estimate 4.5 to 5.5 times the net profit to get a ball park market value of the business. For a service business or a business without any real estate you can estimate 1 to 3 times the net profit plus the value of the equipment and other items used in the daily operation of the business.

Please keep in mind that these are general rules of thumbs and there are always different variations of the multiplier based on the specifics of the industry and the business. But in today’s economic climate it is always good to have some kind of idea as to what your assets may be worth.

The best way to get a market valuation of your business is to get an outside opinion from someone who is familiar with the industry that you work in to give you a market valuation. Not an appraisal, but a market valuation. And it generally cannot be done by ones accountant even though they may inject some of the information, but since they don’t work in the industry of the business owner they are not qualified to give a market valuation for that industry.

Keep in mind that a market valuation is something that should be done quite often as it is like a personal financial statement. A personal financial statement is a flash in time as to what one is worth. It never stays the same and it changes constantly and a business is no different.

So in conclusion I would suggest that you put your numbers together, take a look at the quality of the assets and review the revenue stream that you have and then contact an industry professional and get a market valuation even if you are not considering selling, because the preparedness will help to ensure you that when the time does come you have the correct information helping you to get the best value for your business.

And don’t get too excited about the “rule of thumb” of live expectancy, because who knows I could be wrong. It could be shorter than what we think.

As the conversation continued it was obvious that even with all of their foresight into the business of growing and nurturing their business to the next level it was of extreme discomfort to them of the thought of using a broker to assist them in the selling of these underperforming assets they had been discussing with me. Now, since I am a business broker and I make my living by assisting other people in such task as helping them to determine the market value of an ongoing business and prepare marketing materials that will enhance and present the business in its best light when presenting to a buyer I probably should have been offended by this individuals feelings toward a broker. But, surprisingly I was not. It is not that I am callous to the these type of remarks it is that I too can relate with their thoughts about the use of broker and certain things that we just can’t bring ourselves to doing even though we know that we should even when it is the right thing to do. Like not wanting to pay someone to pump our gas when we know we could afford it, but can’t bring ourselves to paying someone else when we know we could do it ourselves. Like not wanting to pay someone to carry our bags or briefcase at a hotel, because we know how to do it. Like not letting anyone else drive the car while we talk on the phone or write a note, which would be more efficient for us, but not wanting to give up the control of the situation, because we know how to do it. Lots of little things that we just can’t seem to let go of. I am not trying to reason as to why, only recognizing the fact.

So in response to my friend who had made the statement about not ever wanting to use a broker, because they could do it themselves I said. I agree with you. I don’t like to use brokers either. As a matter of fact it drives me crazy when I have to use a broker to sell anything for me whether it is a piece of real estate or something small that could be sold on E-Bay. I concurred with their feelings and agreed. Now needless to say this isn’t going to do anything for my cash flow in the world of business brokering, but it was how I felt and I wanted to be truthful with the gentleman.

However, regardless of how he and I feel about the use of brokers the issue of needing someone or something to sell the underperforming assets still existed. All we had done at this point was have a good conversation with ourselves, but the issue of needing to sell the convenience stores was still at hand. I then asked him if he had anybody on his staff that was familiar with the stores in such a way that they understood the basics of the operation of a convenience store and could read and understand a profit and loss statement for a convenience store and he said yes that he did. He said that he had an individual that had a basic understanding of the income and expense side of the business and had helped them build a couple of stores and was presently working  in their company in their real estate development and marketing side of the business.

I then asked him if the mentioned individual were presented with a prospective buyer for one of the convenience stores did he feel that they would be capable enough to work with the individual in supplying them with the needed information that a buyer would need to decide if they wanted to buy the convenience store and help them through the process of consummating the sale of the store and he said that they could do that. I then suggested that I had a solution to that nasty old broker situation that we both had discussed a few minutes earlier.

I explained to him that in order to be a successful broker it is not always about you the broker. True, you must have a pleasant personality and be reasonably educated and informed about the product or service that you are selling, but you must also have a system to get something sold. Having the ability to build rapport and work with people is very important, but without a system to back you up and guide you through the process of taking a buyer from the introduction of a business to the closing you must have a system and that is what makes a difference between the successful and not so successful brokers of the world. I suggested that if he had such an individual that he had mentioned earlier then I could probably help him in the selling of his underperforming convenience stores and implement  a systematic approach to the selling process and not have to pay a brokerage fee in doing so. He was intrigued and interested.

I explained to him in the respect of selling convenience stores there was such a system that he could employ on a cost basis that could supply him with a selection of services that would accomplish the same thing that a broker would use, but without the cost of a broker. The services available included marketing packages that had been designed specifically for the convenience store industry that conveyed all of the pertinent information that a convenience store buyer was looking for and the marketing tools that brokers use to get the businesses they are selling in front of thousands of buyers who are looking to buy businesses. I also explained to him that there was a book that could guide him through the process of what it would take to sell a convenience store and included most of the forms needed to accomplish a sale and included a list of items to be on the lookout for when selling a convenience store. And that the cost of all of this was less than $500.00 and could save him literally thousands of dollars. Basically, I had given him the road map he was looking for and was going to save him lots of money.

He then asked me where could he get this information for such a small price and why would I as business broker be willing to share this information with him when this is what I do for a living? I explained to him that I understood his feelings about brokers and knew that in my heart of hearts that I was never going to get his business and I knew that there are times when either I or another business broker could not be available to serve his needs, but he still had the situation of needing to sell his stores and I wanted him to have all of the tools he could possibly have when selling his stores. Even though it could have impacted my business it is still human nature to want to help your fellow man and woman. Giving is a part of us and is what we must do to grow.

I can happily say that the gentleman did take my advice and he did contact the company that I had suggested and in the first 60 days had received over 170 buyer inquiries and is now entertaining offers with a closing pending on one of his convenience stores.

So if you feel the same as my friend who could not utter the word broker without leaving a bad taste in his mouth, but yet want to save the many thousands of dollars he is, feel free to contact me at  and I will gladly share with you the same information that I did with my friend who is now in the process of putting buyers into the underperforming and cash draining stores that he once operated.

This is the case of my friend who started out with nothing and worked his tail off in several different businesses and through luck and his intelligence to realize he had a good thing worked and built his business into a very profitable company. And to add to his luck another company came along and realized what a good job he was doing and wanted to acquire his company.

As he explained the transaction to me the two companies had synergies between them that made the two of them a good fit and they began the due diligence process, whereby the acquiring company inspects all of the details of the selling company to verify all of the numbers and the things that they had portrayed about the company was true. After the due diligence process was done then the financial numbers were stated and the price was set between the two parties based on the EBITDA of the company. EBITDA means earnings before interest, taxes, depreciation and amortization. It is the true net income of the company and once this is determined then a buyer and seller come to an agreement on what the multiple is (every business is different, but for convenience stores with real estate it is generally between 4.5 and 5.5 times the EBITDA) and that is the selling price of the company.

As the story continues the eventual selling price was $30 MIL. Now in my book and most people’s book $30 MIL is quite a bit of money, especially if you don’t have any debt against the company and as the story goes he didn’t have any debt. So I know you are probably thinking the same thing I was. Wow! This guy has got it made how can there be a problem with this story? Well as he continued to share with me the deal was closed in January and the taxes that he was going to have to pay on the sale of the company were not due for 15 months. Meaning that if you get the income on January 2008 then you would not have to pay the taxes until April of 2009, but the tax amount was based on the sale price of $30 MIL that took place in January of 2008. (Please keep in mind that the dates have been changed as to not reveal the company or the person in this story). And I didn’t ask, but I assumed that the selling entity must have been a C-Corp, because he said that the taxes that were to be paid on the $30 MIL was $12 MIL (40%) so let’s assume that it was a C-Corp. But as he explained to me that was not a problem, because he had fully invested all of the $30 MIL so that he would have the money available to pay the taxes and then some more, because he could work off of the $30 MIL and make more money in the 15 months before the taxes were really due. So far so good.

Fast forward 15 months later to when the taxes were due to be paid and guess what? The $30 MIL that had been invested was now down to $15 MIL. I didn’t ask him where he parked the money, because it would have been too much torture to put him through. So now he has $15 MIL in his account, he owes the government $12 MIL, which leaves him with $3 MIL a net of 10% of what he sold the company for. Was he broke? No, but a far cry from the original amount of the sale price of the company.

So what is the moral of this story? BE PREPARED. As I mentioned earlier my friend was a very intelligent and successful businessman, but I imagine he got involved into the selling process of his business focusing on the top number and didn’t do a lot of preparing in advance with a team of experienced individuals in all aspects of the selling of a business. As an experienced business broker I would have coached my client far in advance as to what his tax implications would be and would have worked to structure the transaction as to minimize the amount of taxes he would have had to pay. Many times there are several ways to legally reduce your tax liability if start preparing early enough. Selling a business is a team effort that requires many people with specialized skills with everyone focused on the same outcome. Getting as much money as possible into the seller’s pocket. A very simple goal. But must be executed in the correct manner or you could end up like my friend. Big sale number, little money in his pocket.

However, sometimes you don’t always find things that are bad, and I thought that during this time, of all the doom and gloom of our present economy, I would share a story with you about an operator that stood above the crowd and is inspiring to myself and others.

Several years ago, before I began to specialize in the sales and acquisition of convenience stores, I worked as a transactiontional broker in multiple industries.  One of which was the hotel and motel industry.  At the time a friend of mine happened to own a boutique hotel in the Caribbean on the island of St. Croix, U.S. Virgin Islands.  One day he mentioned to me that since he had owned the hotel for several years he had decided to sell it so he could spend more time with his family.  I agreed to help him and immediately began to review his books and records.   One of the first things I noticed was that he was doing a good business…a very good business.  By that I mean he was running a 90% occupancy rate and had been for several years.

It wasn’t like he’d just had a good year or two; he had been having very profitable years for quite some time.  When I asked him how he had managed to get the occupancy rate to 90% and keep it there, he said that over the years during the slow seasons he would make several small changes to the property to maintain a fresh business.  Every six months or so, he made sure to do something different to his hotel.  It could be a new painting on the wall in the lobby or new trash containers or new towels, etc.  But he would always make some change or add something new for his customers to see.

When I asked him why he did that, his reply was, “My customers expect to see something new all of the time.”  He explained, “You see, even though a lot of my customers may be transient, many of them are not, because I work to keep them coming back to me every year.  They enjoy their experience at the hotel and they want to see something different, even if it is a little thing.”  He also mentioned to me that when occupancy would begin to drop-off he would personally go into the town and offer air conditioned rooms to the locals for a reduced price to help fill his rooms and continue to generate cash flow.

Wow, I thought.  What a novel idea.  He went and asked for someone’s business.

So I began to work at selling his hotel. I can’t tell you how many people I had look at his hotel.  Finally I found a businessman and his son from Ohio who had seen the property, met with the owner and had even gotten the accountant involved in the sale of the business.  But just when I was about to write the purchase agreement the deal came to a screeching halt.  The buyer said that he could not buy the business.

I asked him why? Was it because of the asking price?  Was there something wrong with the cash flow or the numbers of the business that did not look in order?  No, it was none of those items at all.  The numbers were great and the assets of the hotel were in excellent condition.  The answer to why he could not buy the business still rings through my ears today as clear as if it was yesterday.  He said, “I cannot buy this gentleman’s hotel, because he is doing such a good job of operating it that there is no more upside left for me.”  He said, “I cannot begin to operate it any better than the present owner, because he has done everything right in operating the business and continues to do so even during the hard times.”

Astounding as it may sound, this hotel was the proverbial case of a car with eight cylinders running on all eight cylinders and doing so well that there was no more upside left in the business.   The business was doing too good to be considered salable.

It wasn’t until some years later that I encountered this same issue again.  I was contacted by a gentleman who owned about 12 convenience stores and had decided that he wanted to sell about half of them to reduce his work load.  Here again when I inspected the quality of the physical assets of the stores and reviewed his books and records I discovered that I had encountered another “eight cylinder car running on all eight cylinders”.

The man and his team were great operators.  Whenever something broke in the store or something needed replaced or maintenance on the outside, they fixed it.  I could not find a blemish anywhere and most of the stores were over 5 years old. His merchandising and floor plan was laid out well and the store traffic flowed.  Every time I visited a store they had merchandising specials throughout the store from different vendors.  All of his stores were very profitable and operating well.  I remembered the hotel in St. Croix and prepared myself for some tough sales.  But I was wrong.  I ended up selling all the stores he asked me to sell.

I know that the people who bought those stores were happy knowing that they were buying excellent running assets.  And they were especially happy with the fact that all they had to do to maintain the stores success was to continue with the process of running the stores the same way that the previous owner had.

So what is the moral of this story?  I think it is twofold.  First, as an operator of a convenience store is your store (or stores) like an eight cylinder car that is running on all eight cylinders?  Meaning, are you doing everything that you can do to ensure the success of each store achieving its highest sales capability? Or is it running on only six of the eight cylinders?  Meaning, do you have room for improvement that you know would enhance the sales both directly and indirectly? If it is only running on six of the eight cylinders then the question is why? Why, would you not want the store to do the best as it can possible can?

Second, if you are a prospective buyer of a convenience store are you going to want to buy a store that is the eight cylinder car running on all eight cylinders where there may not be very much more upside in the sales, but you are assured you are getting a well running store?  Or are you looking for a store that is only running on six cylinders and you happen to know how to make it run on all eight cylinders by enhancing the sales of store through your expertise and experience?

I think the future of the convenience store industry is going to be dominated by the guys with the big eight cylinder engines.  What do you think?

 Bonus:

             Ask, ask and ask them again to buy something when they are at the counter checking out. Even the  slightest bit of suggestive selling will drive profits. And believe it or not customers appreciate it. They    like to know if there any specials or good deals they can take advantage of.

We were talking about a business that he was thinking about acquiring and right out nowhere he looked at me and said, “Well, what is their trick pony?”

I hope it wasn’t too obvious that I had no idea what he was talking about as I stood there with my mouth hanging open. The remark caught me completely off guard. But having ridded myself of the fear of looking completely ignorant a long time ago, I said to him, “I don’t have a clue what you are talking about. What is a trick pony?”

He explained to me that a trick pony is something that business owners, sellers, or marketers use to enhance the sales of a business.

OK, now I knew what he was talking about. In sales this is called a unique selling proposition or USP. In other words, a hook.

Once I understood what he was talking about, I could then begin to dissect the sales figures and figure out what the trick pony was for that business he was considering to acquire.

Most really successful businesses have a trick pony, a hook or a USP. For example one of the most well known USP’s was Domino’s Pizza delivered to you in 30 minutes or less or the pizza was free. Also popular was Federal Expresses “When something absolutely must be there the next day” slogan. These are only a few of the many different hooks that have been used to break through the clutter of the customers mind, grab their attention, and ultimately grab some of their money from their pocket. And in today’s marketing it is even worse than when Domino’s and Federal Express were getting started.

How about you and your store or stores. What is your trick pony? I have seen some convenience stores use soda as a hook: “Any size of Soda 59 cents”. Some will use coffee, some even use bananas. The point is that every store should have a trick pony otherwise what is going to set you apart from the next guy? Probably nothing. And that may be why your sales are about the same as the other guys too.

Don’t get me wrong I am not being critical, just the opposite. Through my travels and meetings with so many convenience store owners across the country I get to see a lot of different stores with fresh eyes and I want to be able to share that information with you.

I suggest you take a walk out into your parking lot and take a look at your store from that angle. See it as the customer sees it. Actually walk through the sequence of events that a customer would and experience your store from their perspective.

Remember the customer that frequents your store in the morning is different than the customer who visits your store at noon. And those are both different from the customer who visits your store at night. You really have 3 different types of customers so the same trick pony probably isn’t going to work for all three of them.

Nobody said that this was going to be easy, but it will be more profitable to you.

I will bet you that Tom Monaghan of Dominos and Fred Smith of Federal Express are glad they came up with a trick pony.

Most convenience store owner operators started out in business by either building their businesses from the ground up or by buying or building one or two convenience stores. Then after a while they get the hang of operating stores and understand the nuances of the business. What vendors to use, what prices to charge to get the best gross profit margins and what items generally they should be carrying for sale in their stores.

If luck is with them and they are pretty good at what they are doing and they work hard they will have a profitable business. Then the proverbial light bulb will come on. Wow, they will say to themselves. We have worked our tails off and now we have 2 stores that are making money and it really isn’t that hard so we can only imagine how much more money we could make if we had more stores. So the game begins. It becomes evident in their mind that to be really successful like the Wal-Marts of the world all they need is more stores. It becomes an obsession and their focus begins to slowly change from the operations of the 2 stores to the finding of possible locations to build another store. Forget the fact that they have never built a store from the ground up before, but they have decided that this is the way to go so they search and search until they find the ultimate piece of property for the perfect store they have been fantasying about.

Alas, they finally do find the location and since they have never built a store before and they are  uneducated about the process that will need to take place for this creation to happen they somehow manage to convince a bank to loan them the money based on the success of their other two stores and for the construction of their new store. Of course they have put the equity of their two stores and everything else they have up for collateral so that they may build the new store, but that is OK, because they are going to be wildly successful with their new venture. Their vendors are on board with the new project since they want to sell more products so they are forthcoming with advice and constructive criticism. Finally after all of the construction delays and cost overruns the store is finished and opened to crowd of new customers who are thrilled to spend money at the new store. Or at least that is what they had envisioned during time they were building the new store, because that is what they have needed to make this new venture work.

The truth of the matter is that with the new store they have hocked everything they own and a good portion of their future to build this new store and the new store is not performing like they thought it would. Sure it makes money, but nothing like it was supposed to in their mind and as a matter of fact even though it is growing its sales every month it is not always profitable and actually takes some of the income from the other two stores to help it along some months. Egad, what is a person to do? Well the solution is really quite simple. We need more stores. We could never sell the new store, because we just paid an outrageous tuition to get this thing built and it is not reached its full potential in profitability and now we know how to do build stores. Since now we know how to deal with the bureaucracy of the local and state governments to get permits and plans approved for construction and how to deal with those greedy contractors who keep coming up with different ways to add costs to our project and invent those things called “change orders” which add more to the overall cost of our project and now we know how to present the financial proformas to the banker so that they will loan us more money and we will not have to explain what a veeder root or Ruby system is for the 10^th time and now we know that we don’t need to allocate all of that space in our store for the new product lines that the vendors said that all new stores need to get the extra profit that the big guys are getting. No, now we know how to build stores and that is what is needed to fix this little issue of the new store not performing like we thought it would.

Yes, we need more stores. But building new stores is not the complete answer. Yes, building new stores will help our situation, but that will take a long time and we don’t have a long time. Sure we can build one when we find the perfect property, but to fix this issue now we need more stores so we need to go on the hunt to find more stores to buy. Since we know how to build and operate stores based our first two stores we started with (both which are still profitable) we believe in our minds that any stores we should buy whether they are great stores or not great stores will be great stores after we get a hold of them. So we begin the pursuit of finding stores to buy.

You see, building and searching for stores to buy is a whole lot more exciting and fun than managing and operating a store. Heck, we already know how to manage and operate a store and that is old stuff and on top of that we have a couple of good managers who are watching the stores for us and who are keeping all of the employees in line and making sure that things aren’t walking out the stores without being paid for. We have got things covered so we can focus our time and energy on the big picture of becoming a multi store operator just like the big boys and we will be in the big money and we will have a general manager to watch over the employees and the payroll and the marketing and hiring and firing and ordering of fuel and merchandise. That is how it is supposed to be done.

Now, before I go on with this story you are probably wondering why don’t we just stop right there and get these 3 stores all lined out and get everything under control before even contemplating growing this business. Well, the reason why, is the desire to grow and make a business larger can be a sickness and sometimes can develop into a disease if the desire to acquiring more stores and growing the business becomes the drug of choice. Never mind all of the reasons and justifications you may want to apply to this sickness when an individual has the desire to grow the only drug that will satisfy the urge is the growth of the company and more stores.

Now they are on the hunt and are out to buy more stores and guess what they find? More stores to buy and they begin to acquire more and more through different and sometimes creative ways of acquisition and before too long we now have 17 stores. Not bad for only starting with two stores to now have 17 stores. Never mind the fact that there is very little if any consistency in the floor plans or sizes of the stores or the type of equipment by manufacturer to help conserve costs for maintenance and repair. And never mind the fact that some of the ones we acquired had a franchise food service program, which we can’t get out of and is not profitable. We can justify that by saying we needed to test these kinds of programs anyway for future use. And never mind the fact the stores are not all located in the same market and now cover a minimum of 3 different markets and require us to have a regional manager who may spend 35% of their time just driving from location to location instead of being on site at a location to help improve sales.

Basically, we have situation where we have a chain of stores that are generally out of control in regards to ultimate profitability on a per store basis. The chain was grown to satisfy a need of the owner and even though it may be profitable it is not at its fullest capability and while the chain was being put together the original two stores are no longer the most profitable stores of the bunch instead what has happened is the sales of the two original stores has been reduced to the average of the other stores which is not the greatest either. Alas, the first 2 stores are average. And we all know the definition of average.  “Average is the best of the worst and the worst of the best”.

So now we have what I call an “In Between”. The owner of the 17 store chain got what they wished for (more stores), but they are not a small owner operator with a couple of stores nor are they a big chain of stores, because since the time they got into the business the industry has changed dramatically due to rising costs of products, employee costs, lack of capital in the market place to assist in buying or building new stores and the overall economy has forced operators to be extremely efficient or perish. What they are is an “In Between”. They are “In Between” the big and the little and they have an infrastructure for this 17 store chain that could easily accommodate more stores by only adding another person in the office or another person in operations to oversee the new stores, but guess what? They are tired and they have burned through a lot of time to get to the 17 store size and they know that it will take more time and more money to get to the next level. But the question is. What is the next level? Is it 30 stores, 50 stores, 100 stores and even then will they not be facing the same thing that they are facing now? Will they still be an “In Between” and still chasing the proverbial carrot at the end of the stick. Deep down in their heart and mind they know that some of the stores need replaced or sold or closed, but that would be admitting defeat and they are not a quitter. No we need to keep those stores open, because they help pay the administrative overhead and we don’t want to have to face the people who have worked for us for many years and tell them that we don’t need them anymore. Yet, we don’t have the ambition or time or money to go out and build or buy more stores. At this point in the game when it should be about maximizing the stores and making them as profitable as possible even if that means we should be closing and selling off underperforming assets it is instead about maintaining. Working to maintain the quality of life that we worked to grow accustom to. It may not be the jet setting type of lifestyle that the proverbial big boys probably enjoy that we read about in the trade magazines, but it is a good life with all of the amenities that an independent business person could ask for and there are the occasional trips to some wonderful places for get togethers with other people in the industry and trade shows and sometimes maybe a vendor will spring for a trip or an outing that is fun and free. So why rock the boat? Why not let things continue on and just enjoy the ride. Heck, we deserve it. We worked our tails off to get what we have and we are going to enjoy it.

You want to why this isn’t going to work? Because “nothing stays the same”. Businesses, relationships, cities, and people. Everything changes. Things are either going forward or going backwards. Growing or dying.  It is doing anything, but staying the same. It is an undisputable law of the world. “Nothing stays the same”.

And therefore by one’s own account they have become an “In Between”. Please do not take the term “In Between” as a negative comment, it is merely a term to describe a situation that unfortunately is very prevalent in the business world and can apply to many different industries, but it is a fact and can be considered by some a sickness. Fortunately there is a cure for this sickness. By taking the antidote called “reality check” and admitting that you may have some form of this sickness a cure can be implemented. The cure is to assess our present situation and decide that being an “In Between” is OK and accept the fact that we are never going to be the biggest guy on the block, nor are we going to go back to working behind the counter standing on our feet for 8 to 10 hours a day. No, instead we are going to do what we started out intending to do, but got sidetracked along the way and that is to be the best at what we do by making our stores the most profitable and successful stores they can be for what and where they are. And if they are not going to be profitable enough to justify themselves we are going to either close them or sell them off, because we are first and foremost a business person. And a business person runs a profitable business to the best of their ability and does not operate a charity facility. Charity is what one does with their time, talent and treasure and not what they do by keeping an unprofitable store open or part of the multi store operation when there better ways to capitalize on this asset rather than just operating it at a loss or breakeven. That is dumb. Just plain dumb and I don’t know any other way to describe it. There are always different situations to justify the reason to keep an unprofitable store open or in the mix of other stores, but even in those situations it is generally temporary.

So if we are to be an “In Between” congratulations, because we have made it farther than most people in business, but let’s make sure that we are going to be the best we can be and not just flounder around with the concept of owning a lot of stores. We don’t make any money from our ego and we can’t take our ego to the bank. So we may need to order ourselves some of the drug called “reality check” and take a big gulp to get us back in line with the world and onto the road to maximum profitability. Take a hard look of where we are in the market place of today and make the needed decisions that will give us our ultimate profitability.

My occupation centers around helping business owners analyze their assets and coaching them on decisions as to whether or not they should sell all or part of their businesses.  As such, I am privy to a wide variety of business information and I can tell you first hand, I tend to see a lot of bad operations.  Additionally, based on my experience of having owned and operated several businesses myself, I also coach buyers on what to look for in a business and how the process of buying a business works.  So it is not uncommon for me to skew to the negative side of things and to look for warning signs that could potentially hurt either party in a business resale transaction.   I don’t enjoy searching for the negative aspects of business, but I know them and I work hard to seek out, identify, and mitigate the impact that these risk factors may have on either party.

However, I don’t always find things that are bad.  And during this time, with all the doom and gloom of our present economy, I thought I would share a story with you about an operator that stood above the crowd and ran an excellent business.

Several years ago, before I began to specialize in the sales and acquisition of convenience stores, I worked as a transactional broker in multiple industries.  One of which was the hotel and motel industry.  At the time a friend of mine happened to own a boutique hotel in the Caribbean on the island of St. Croix, U.S. Virgin Islands.  One day he mentioned to me that he was tired and since he had owned the hotel for several years he had decided to sell it so he could spend more time with his family.  I agreed to help him and began to review his books and records.   Upon initiating my review, one of the first things I noticed was that he was doing a good business…a very good business.  By that I mean he was running a 90% occupancy rate and had been for several years.

It wasn’t like he’d just had a good year or two; he had been having very profitable years for quite some time.  When I asked him how he had managed to get the occupancy rate to 90% and keep it there, he said that over the years, during the slow seasons, he would make several small changes to the property to maintain a fresh business.  Every six months or so, he made sure to do something different to his hotel.  It could be a new painting on the wall in the lobby or new trash containers or new towels, etc.  But he would always make some change or add something new for his customers to see.

When I asked him why he did that, his reply was, “My customers expect to see something new all of the time.”  He explained, “You see, even though a lot of my customers may be transient, many of them are not, because I work to keep them coming back to me every year.  They enjoy their experience at the hotel and they want to see something different, even if it is a little thing.”  He also mentioned to me that when occupancy would begin to drop-off he would personally go into the town and offer air conditioned rooms to the locals for a reduced price to help fill his rooms and continue to generate cash flow.

Wow, I thought.  What a novel idea.  He went and asked for someone’s business.

So I began to work at selling his hotel. I can’t tell you how many interested people I had look at his hotel.  Finally I found a businessman and his son from Ohio who had seen the property, met with the owner and had even gotten the accountant involved in the sale of the business.  But just when I was about to write the purchase agreement the deal came to a screeching halt.  The buyer said that he could not buy the business.

I asked him why? Was it because of the asking price?  Was there something wrong with the cash flow or the numbers of the business that did not look in order?  No, it was none of those items at all.  The numbers were great and the assets of the hotel were in excellent condition.  The answer to why he could not buy the business still rings through my ears today as clear as if it was yesterday.  He said, “I cannot buy this gentleman’s hotel, because he is doing such a good job of operating it that there is no more upside left for me.”  He said, “I cannot begin to operate it any better than the present owner, because he has done everything right in operating the business and continues to do so even during the hard times.”

Astounding as it may sound, this hotel was the proverbial case of a car with eight cylinders running on all eight cylinders and doing so well that there was no more upside left in the business.   The business was doing too good to be considered salable.

It wasn’t until some years later that I encountered this same issue again.  I was contacted by a gentleman who owned about 12 convenience stores and had decided that he wanted to sell about half of them to reduce his work load.  Here again when I inspected the quality of the physical assets of the stores and reviewed his books and records I discovered that I had encountered another “eight cylinder car running on all eight cylinders”.

The man and his team were great operators.  Whenever something broke in the store or something needed replaced or maintenance on the outside, they fixed it.  I could not find a blemish anywhere and most of the stores were over 5 years old. His merchandising and floor plan was laid out well and the store traffic flowed.  Every time I visited a store they had merchandising specials throughout the store from different vendors.  All of his stores were very profitable and operating well.  I remembered the hotel in St. Croix and prepared myself for some tough sales.  But I was wrong.  I ended up selling all the stores he asked me to sell.

I know that the people who bought those stores were happy knowing they were buying excellent running assets.  And they were especially happy with the fact that all they had to do to maintain the stores success was to continue with the process of running the stores the same way that the previous owner had.

So what is the moral of this story?  When buying a business you always have a choice. You can buy a business that is an excellent running business and all you have to do is show up and do the same things that the last owner was doing. This would be like buying an eight cylinder car that is running on all eight cylinders.

Or you can buy a business that needs some attention and some tender loving care and has more upside, but will also take more work to get the business tuned up and running well. This would be the eight cylinder car that is only running of six cylinders and needs work. In other words it is a fixer upper.

Either way you go you will always generally be farther ahead than trying to start a business from scratch and doing it the hard way.  So go for it. Find the business that suits your taste and then decide if you are buying a fixer upper or one that needs only you and your time and begin to enjoy the journey.